The Economic Crisis is Now Political

Friday, 31 October 2014

by toby matthews

Clacton-on-Sea is going nowhere… This is Britain on crutches. This is tracksuit-and-trainers Britain, tattoo-parlour Britain, all-our-yesterdays Britain

- Matthew Parris, The Times

Matthew Parris’s dismissal of poor, coastal Essex adorned thousands of UKIP leaflets in Clacton. It served only to justify UKIP’s rout of the Tory party.

Inadvertently, Parris came close to the truth: Britain as a political entity almost ceased to exist in September. Despite the eventual result in Scotland, the strength of the yes vote saw victory in Glasgow, quadrupled the membership of the SNP and caused Scottish Labour to implode. The high turnout alone belied the modern complaint of political apathy.

From Clacton to Dundee, Britain is discontented. Instead of demurring from hard politics, it’s time to look at the facts and act.

A boy born in Scotland’s most deprived areas has a life expectancy of 68 – 8 years below the national average. But this is not a Scottish problem, it is a peripheral problem. In Clacton-on Sea the average male life expectancy is 8.8 years below average. In Blackpool it is lower still.

Short life expectancy is a symptom of a failed economy. This failure, which envelopes millions across the country, is most stark at the periphery. This struggle links Celtic fringes to the English coast. From Scotland to the most deprived village in England – which is in Clacton-on-Sea by the way – our society is failing.

To address this, we must be candidly liberal about the economic policies to which all three main parties hold true. We have built a society around the rentier. It is an economy in which owners – of land, patents and infrastructure for instance – can expect to get rich whilst they sleep. The worker may resolve to work harder, but all she will achieve is a rent hike.

This situation creates many economic perversities. From debt-fuelled ‘housing’ (land) busts to yawning inequality and even boarded up high streets.

One of these outcomes is that a country’s periphery cannot compete with its economic core. London has untold privileges in its infrastructure, population and pool of labour. Yet the owners of London do not pay for the privileges that society and government bestow it. Instead, workers, consumers and struggling businesses pay, even those that least benefit from it – and can least afford it.

We need only revisit Ricardo’s Law of Rent to understand that the economic margin will be hit the hardest. They cannot compete with London and they certainly can’t bear the same tax load.

To resolve this requires rigorous liberalism. It is odd that we tax jobs – it is an insanity that we do so at the struggling periphery. We must begin to remove taxes that are harmful to our economy, especially those that curtail employment and modest incomes. Instead, we must collect the rent of land and other privileges, the value of which is created by and belongs to the commonwealth.

In such a way, a struggling seaside town or Scottish city may face London on equal terms. They will not have the assets of London, but this would be reflected by the trivial land rent their citizens and businesses pay. A company may choose to trade in London, whereupon they would pay the market rate for that privilege. But they may also decide that these privileges are not worth paying for. They may decide instead to go somewhere cheaper – to the seaside perhaps.

Matthew Parris spent his career furthering the cause of illiberal Conservative economics. But the very economics he has championed has left places like Clacton literally, and figuratively, at the end of the line.

It is no wonder that Yorkshire and Cornwall, rightfully, now seek to join the Scots by distancing themselves from Westminster rule. But neither federalism nor UKIP will fix our broken society.

To reorient the country, we must reorient the economy. Rentier capitalism, so well sold by the Conservatives and so readily adopted by ourselves and Labour, must give way to liberal political economy.

Toby Matthews sits on the executive committee of ALTER (Action for Land Taxation and Economic Reform), an affiliate group of the Liberal Democrats. The President of ALTER is Dr Vince Cable MP.

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All very nice, but what exactly is ALTER proposing? NICs raised £107bn last year, so how much of this are you planning on replacing? What is the rate you’d use, how do assess the distributional effects? Until these pretty fundamental elements are answered, this is unimplementable hot air.